How does the optimal design of macroprudential capital controls depend on the ability of some agents to circumvent regulation? To address this question, we study the interaction between a regulated and an unregulated sphere in a model economy where pecuniary externalities calls for ex-ante...

This paper studies the link between banking crises, sovereign default and government guarantees. A banking crisis can lead to a domestic credit crunch, which can be mitigated by government guarantees. However, the provision of bailout guaran- tees exposes the government to potentially severe...

We develop a new framework for studying the implementation of monetary policy through the banking sector. Banks are subject to a maturity mismatch problem leading to precautionary holdings of reserves. Through various instruments, monetary policy alters tradeos banks face between lending,...